iShares, the San Francisco-based issuer behind nearly 200 ETFs, announced today the launch of five new international sector funds. The five funds, which include four financial ETFs and one materials ETF, expands iShares offerings in the international segment allowing investors to exploit regional differences in sector performance. The new ETFs include the MSCI ACWI ex US Financials Sector Index Fund (AXFN), MSCI Emerging Markets Financials Sector Index Fund (EMFN), MSCI Europe Financials Sector Index Fund (EUFN), MSCI Far East Financials Sector Index Fund (FEFN), and MSCI Emerging Markets Materials Sector Index Fund (EMMT).
“With the addition of these iShares MSCI International Sector Funds, individuals, financial professionals and institutions will now have access to one of the most comprehensive sector offerings, including U.S. sector/subsector, global sector, and now international sector ETFs,” said Michael Latham, co-CEO of iShares at BlackRock. “We are excited to expand our international financial and materials sector fund offerings as it is an underserved segment of the market and one that continues to draw strong investor demand.”
Recent news out of Washington regarding bank restrictions has spooked investors, especially reports that the Obama administration will seek to keep commercial banks separate from proprietary trading activities. The new iShares fund provide alternatives for investors looking to gain exposure to the financial sector while avoiding U.S. banks that suddenly bear significant political risk. “The new proposal moves the banking sector a major step closer to Glass-Steagall and indicates a policy shift in bank regulation,” said UBS analysts who were quoted today at efinancialnews. “Today’s announcement suggests that this has now shifted to restrictions on market activities that could result in the forced sale of certain businesses. The political/regulatory backlash towards the banking industry is likely to persist in the coming months and could continue to weigh on sector growth and market sentiment.”
Meanwhile, as emerging markets continue to grow, the basic materials sector will grow increasing important as developing countries seek to produce domestic supplies of goods rather than relying relatively underpopulated commodity exporters such as Australia and Canada. However, EMMT looks to face stiffer resistance than its financial counterparts since there is already a number of international materials ETFs (albeit few focused exclusively on materials in emerging markets specifically).
- AXFN provides exposure to the financials sector of developed and emerging markets countries, excluding the United States. The Fund offers the only GICs-based financial sector classification that also includes emerging markets exposure. The top five country exposure of the index is UK (13%), Australia (10%), Canada (10%), Japan (9%) and Spain (6%).
- EMFN provides exposure to the financials sector of emerging market countries. The financials sector includes banks, diversified financial companies, insurance companies and real estate companies. The top five country exposure of the index is comprised of China (28%), Brazil (14%), South Korea (10%), India (8%) and Taiwan (8%).
- EUFN provides exposure to the financials sector of developed market countries in Europe. The top five country exposure of the index is UK (29%), Spain (13%), France (13%), Switzerland (12%) and Germany (10%).
- FEFN provides exposure to the financials sector of developed countries in the Far East region. The financials sector includes banks, diversified financial companies, insurance companies and real estate companies. The country breakdown of the index is Japan (63%), Hong Kong (26%) and Singapore (12%).
- EMMT providing exposure to the materials sector of emerging market countries. The materials sector includes chemical companies, construction materials companies, containers and packaging companies, metals and mining companies and paper and forest product companies. The top five country breakdown of the index is Brazil (30%), South Africa (13%), South Korea (12%), Taiwan (10%), and China (7%).
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Disclosure: No positions at time of writing